Energy pushes Toronto higher as U.S. stocks give up early gains

TORONTO — A broad rally led by the energy sector sent Canada’s main stock index higher, while U.S. markets ran out of gas after getting a morning boost.

Craig Fehr, investment strategist at Edward Jones, said the TSX outperformed on the back of what has largely powered the index for much of the year: energy and materials.

“The move that we’re seeing might be just a bit of a relief rally, particularly in oil. I think gold still could probably represent that safe-haven asset for investors that are looking to derisk,” he said.

Crude oil prices have dipped a lot lately, so it should be expected that there will be some periodic bounces, Fehr said. “So I’ve probably characterized this more as just the markets levelling things out after what’s been a pretty sharp move to the downside for crude oil prices.”

The September crude oil contract was up $4.85 US at $99.42 US per barrel and the August natural gas contract was up 46.3 cents at $7.48 US per mmBTU.

Most Canadian energy producers were positive on the day contributing to a 3.6 per cent gain for the sector. Athabasca Oil Corp. was up 12.3 per cent, while Precision Drilling Corp. climbed 9.0 per cent after it signed a deal to buy the Canadian well servicing business of High Arctic Energy Services Inc. for $38.2 million in cash.

The Canadian dollar traded for 77.23 cents US compared with

76.70 cents US on Friday as the U.S. dollar weakened from its strong run.

Materials, which includes miners, forestry firms and fertilizer companies, also rose on a slight increase in bullion prices with Capstone Mining Corp. 8.3 per cent higher. The August gold contract was up $6.60 US at $1,710.20 US an ounce. The September copper contract was up 11.2 cents at nearly $3.35 US a pound.

Overall, the S&P/TSX composite index was up 201.17 points at 18595.62, falling from an intraday high of 18733.59.

U.S. stock markets retreated after getting a morning boost from positive earnings reports from Goldman Sachs and Bank of America. In New York, the Dow Jones industrial average lost 215.65 points at 31072.61 for a 572-point drop from the high of the day. The S&P 500 index was down 32.31 points at 3830.85, while the Nasdaq composite was down 92.37 points at 11360.05.

The intraday market volatility is pretty consistent with what we’ve seen regularly over the past several months — big gains and big losses that have sometimes reversed midday, said Fehr. “The sentiment continues to pivot around this recession or no recession narrative, and today is no different. There was no real data that caused some of the wind to come out of the market sales.”

“A more sustained, durable recovery is going to require consistent and persistent better news on the inflation front.”

While the U.S. Federal Reserve is in a quiet period ahead of its next interest rate announcement on July 27, the market dip could have been supported by fading homebuilder sentiment and commentary from Goldman Sachs CEO David Solomon that inflation was “deeply entrenched” in the economy.

“Any signs that some of that housing activity is starting to lose momentum obviously feeds into the concerns that the economy is at best slowing and at worst maybe falling into recession but the market is not yet convinced that it has to be a severe recession.”